Hong Kong's protests have escalated to the shutdown of Hong Kong international airport, shaking the reputation of one of the Asian financial hubs. Air transportation for passenger and cargo is disrupted. KResearch views that since the volume of Thailand's outbound shipments to Hong Kong is small; Hong Kong's demonstrations are unlikely to have significant impacts on the air cargo of Thai goods' shipment.
Nonetheless, the paralysis will severely damage the Hong Kong economy in the second half of 2019, dragging on the overall growth of Hong Kong's economy in 2019. Consequently, overall Thailand's exports will be affected. KResearch views that there is no end in sight for the political crisis anytime soon, and there are risks of heightened tensions, which will certainly hurt Thailand's exports to Hong Kong during the remainder of the year. KResearch projects that the situation may damage Thai exports to the tune of USD500-USD900 million. Consequently, Thai outbound shipments to Hong Kong for the entire year of 2019 may contract 9-12 percent.
If the situation does not escalate and ends soon, the impact on Thailand's exports may be limited at USD500 million. Thailand's consumer products bound for Hong Kong may become more vulnerable in line with the economic sensitivity of Hong Kong. The affected products are gems and jewelry, vegetables and fruits, rice, processed chicken, fresh eggs, canned seafood and canned fruits.
However, if the situation spirals out of control, the domestic business activities may halt, causing disruption to maritime transport. The damage to Thailand's outbound shipments to Hong Kong may increase to USD900 million as consumer good exports are set to plunge further. Moreover, most of Thailand's intermediate goods are shipped via Hong Kong, which is used as a transit point to China. These affected products include computers and parts, integrated circuit boards, telephone equipment, transistors and diodes and printed circuits.
Additionally, as Hong Kong serves as a gateway for China, KResearch views that the Hong Kong airport shutdown may not significantly impact trading activities with China. However, the demonstration will hurt Hong Kong's image and reputation, which are important to China's business sector. It may further shake the investors' confidence in China and further dampen the value of the Yuan, counter to the movement of regional currencies, especially the Thai Baht, which is has strengthened in value. Eventually, the political crisis in Hong Kong may dampen the sentiment of Thailand's exports by hurting demand for Thailand's exports in both China and Hong Kong.